Should You Be Adding APN Property Group (ASX:APD) To Your Watchlist Today?

By
Simply Wall St
Published
January 07, 2021
ASX:APD

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like APN Property Group (ASX:APD), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for APN Property Group

How Quickly Is APN Property Group Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, APN Property Group's EPS has grown 27% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While revenue is looking a bit flat, the good news is EBIT margins improved by 5.9 percentage points to 48%, in the last twelve months. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
ASX:APD Earnings and Revenue History January 8th 2021

Since APN Property Group is no giant, with a market capitalization of AU$177m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are APN Property Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it APN Property Group shareholders can gain quiet confidence from the fact that insiders shelled out AU$489k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Non-Executive Chairman Christopher Aylward who made the biggest single purchase, worth AU$147k, paying AU$0.59 per share.

Along with the insider buying, another encouraging sign for APN Property Group is that insiders, as a group, have a considerable shareholding. To be specific, they have AU$58m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 33% of the company; visible skin in the game.

Should You Add APN Property Group To Your Watchlist?

For growth investors like me, APN Property Group's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for APN Property Group (of which 1 is concerning!) you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of APN Property Group, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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